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Daily Mirror
Daily Mirror
Business
Levi Winchester

Bank of England steps in to calm markets AGAIN as Therese Coffey insists pensions are safe

The Bank of England has stepped in again to calm markets this morning as it warned of "a material risk to UK financial stability".

The central bank said it will widen the range of bonds it will buy to help "restore orderly market conditions".

It comes amid concerns over another "fire sale" of Government bonds - or gilts - despite Chancellor Kwasi Kwarteng bringing forward his new fiscal plan and independent economic forecasts to October 31.

The Bank confirmed it will begin to purchase index-linked gilts from today, Government bonds with interest payments in line with inflation.

It said in a statement: "The beginning of this week has seen a further significant repricing of UK government debt, particularly index-linked gilts.

"Dysfunction in this market, and the prospect of self-reinforcing 'fire sale' dynamics pose a material risk to UK financial stability."

Deputy Prime Minister Therese Coffey said she is confident pensions are safe (AFP via Getty Images)

It comes just one day after the Bank of England announced it would double the daily limit on its emergency bond-buying programme before the scheme ends on Friday.

The daily limit has been upped to £10billion, an increase from £5billion originally.

Speaking after the Bank of England announced its latest intervention today, deputy Prime Minister Therese Coffey said she was confident that people's pensions were safe - but admitted she wasn't "aware of the details of exactly what's happened this morning".

She told BBC Breakfast: “I’m absolutely confident pensions are safe, the Bank of England is independent and undertaking its role in trying to bring some stability, which it had done.

“I’m not aware of the details of exactly what’s happened this morning. The short briefing message I’ve had from Treasury is that it’s a technical financial stability.”

Long-dated gilt prices tumbled, which sent yields on 30-year bonds soaring to 4.7% on Monday - their highest level since the Bank of England was forced to step in last month

Meanwhile, the pound has dropped slightly and is currently worth $1.10 against the US dollar.

Bank of England chiefs were forced to intervene last month after the pound sunk to an all-time low of $1.03 against the US dollar following the Mini-Budget.

The market turbulence sparked a huge sell-off of gilts, which are often bought by pension funds as an investment.

Some of the bonds lost around half their value in a matter of days - sparked fears that some pension funds were hours from collapse.

The Bank of England intervention on October 14 was widely thought to have prevented black holes in the accounts of many retirement savings firms.

It is feared pension funds “would have been left with negative net asset value” and cash demands they could not have met.

The Institute for Fiscal Studies think tank this week warned that Mr Kwarteng must make "big and painful cuts" of up to £60billion to keep spending under control when he announces his economic plan.

Pat McFadden MP, Labour’s shadow chief Secretary to the Treasury, said: “That the Bank of England has been forced to step in for a second day running to reassure markets shows the government's approach is not working, and creates renewed pressure for the Chancellor to reverse his Budget.

“This is a Tory crisis made in Downing Street, being paid for by working people.

“They have lost all credibility and control and they must respect our nation's independent institutions, go back to the drawing board and reverse this damaging Budget.”

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